Author: Matt Crosby
Compiled by: Blockchain for Beginners
Bitcoin's global hash rate has been declining for several months, and mining difficulty has just recorded one of the steepest drops on record. Typically, this story is straightforward: miners shut down equipment because it becomes economically unviable. But this time is different: publicly traded mining companies' stocks are experiencing one of their strongest performances in years, while BTC itself has suffered significant losses. In every previous cycle, miner stress and price pressure moved in tandem; now they are diverging, and the market has not yet fully priced in what this divergence means for long-term hash rate.
If you're short on time, start with these points:
Networkhashrateis emitting one of the longest-lasting miner capitulation signals in Bitcoin history.
Miner difficulty has dropped 19.9% from its peak, marking the third-largest decline since the widespread adoption of specialized mining hardware.
Despite miners selling thousands of bitcoins, mining company stocks have significantly outperformed BTC over the past year.
The BTC-denominated block reward income has just reached the lowest daily level on record.
The average daily fee income over the past 28 days doesn't even cover the subsidy for a single block.
Miners are indeed surrendering.
In Bitcoin’s history, few hash rate pullbacks have lasted longer than this one. Miner difficulty is also declining in tandem, precisely demonstrating that the protocol mechanism is functioning as designed: every 2,016 blocks—approximately every two weeks—the network adjusts the target difficulty to ensure blocks continue to be produced at an average rate of one every ten minutes. As fewer machines participate in hashing, the target difficulty naturally decreases. Today, miner difficulty has dropped 19.9% from its peak; since ASICs replaced GPUs as the dominant mining hardware, only two pullbacks have been deeper than this one.
Figure 1: Miner difficulty has dropped 19.9% from its historical peak.
The only two comparable periods, with durations also close to this one. The deeper one occurred after China fully shut down Bitcoin mining, which was almost the most straightforward type of event: policy directly forced mining farms offline, causing an immediate collapse in hash rate—any observer could easily predict the next step: these machines would seek cheaper electricity and reconnect to the network elsewhere.
Figure 2: Bitcoin networkhashratehas been declining for 287 consecutive days.
Why are mining company stocks rising instead?
Over the past year, BTC has declined by approximately 46%. However, the largest publicly traded mining companies saw significant gains during the same period, with the top performer rising over 430%. This is not the typical behavior for this asset class. Historically, mining company equities have been viewed as “leveraged Bitcoin,” meaning they tend to fall more sharply during downturns and rise more strongly during upswings. Therefore, such a large divergence as this is extremely rare.
Figure 3: Performance of listed mining companies relative to BTC over the past year.
What’s truly driving all of this is the AI narrative. For years, Bitcoin and the largest AI ETFs have moved in tandem, with correlations reaching as high as 0.8 to 0.9 at certain points. But now this relationship has reversed: AI continues to rise, while Bitcoin is weakening.
The block subsidy is being reduced.
Miners recently recorded the lowest daily block reward income in BTC history. Part of this is due to a drop in hash rate—before the difficulty adjustment catches up, blocks are mined slower than every ten minutes—but the main reason is simply the protocol operating as designed. The block subsidy halves every four years, and it will continue to halve until no new coins can be issued.
Figure 4: Miner block reward income denominated in BTC has dropped to a new all-time low.
Since the first halving, the same rebuttal has been raised in each cycle: the price will compensate. That is, although fewer coins are produced per block, as long as each coin becomes more valuable, dollar-denominated revenue can still be maintained. This logic has held true so far. The Puell Multiple, a metric used to measure miner revenue health, is currently around 0.75, indicating that miners’ current revenue is roughly three-quarters of the average over the past year. In other words, daily revenue is currently around $30 million, compared to a longer-term average of nearly $40 million.
Who will fill this gap?
The other answer has always been fees, and it has been that way from the beginning. One day, block subsidies will reach zero; at that point, the network security budget must be solely supported by fees, or else security funding will shrink along with the subsidy.
Figure 5: Percentage of miner fee income relative to total miner income.
But reality is still very far from that point. Miners currently earn about $30 million per day, with transaction fees contributing only around $200,000. In other words, the average transaction fee revenue over the past 28 days doesn’t even cover the subsidy for a single block, while the Bitcoin network generates about 144 blocks per day. Regardless of how the transaction fee market may eventually evolve, at present, it only covers enough security budget to sustain approximately ten minutes.
What does this mean?
Today, Bitcoin is certainly not facing any immediate security risks, and this article is not making a direct judgment on price. However, the shape of this round of capitulation is clearly different from previous cycles. Miners have simply found a more profitable use for their hardware, and this shift has occurred while the coin price has been declining, block subsidies have been shrinking, and transaction fee income has shown almost no improvement.
In a bear market, no one wants to hear another pessimistic narrative, and I know this article reads much like one. But conversely, the problems that truly need to be addressed are often only taken seriously during a bear market. In the long term, miner incentive mechanisms will either be deliberately designed and refined, or they will continue to rely on higher coin prices to temporarily mask the issues.